BWXT Chief Doesn’t Foresee Earnings Hit Over Botched Missile Tubes

Botched welding jobs on 12 missile tubes for the Navy’s next-generation ballistic-missile submarine should not materially affect tube-vendor BWX Technologies’ [BWXT] bottom line this year, the company’s chief executive said Tuesday.

However, it is “too early to tell” whether the gaffe will prevent BWX Technologies (BWXT) from winning more business with the Navy’s Columbia-class submarine prime contractor General Dynamics [GD] Electric Boat (GDEB), Rex Geveden, BWXT’s chief executive officer, said on a conference call with investor analysts. Geveden said he expected another award opportunity in the first quarter of 2019. 

BWXT self-reported bad welding on the 12 Common Missile Compartment tube assemblies to both GDEB and the Navy some time in the quarter ended June 30, Geveden said Tuesday. The company delivered seven balky tubes to GDEB and has five more potentially affected tubes under construction in its factory in Mount Vernon, Ind., Bill Couch, a spokesman for Naval Sea Systems Command, wrote in an email Tuesday.

Despite the slip-up, the Navy still believes GDEB will start building the first Columbia-class sub by U.S. government fiscal year 2021, Couch wrote. That keeps the sub on track to make its first patrol in fiscal year 2031.

Meanwhile, the seven faulty BWXT tubes delivered to GDEB “are in various stages of outfitting but have not been installed on any submarines,” Couch wrote.

BWXT’s internal inspections were not rigorous enough to catch the bad welds before some tubes shipped, Geveden said Tuesday.

“Some welding indications were not caught in the inspection,” said Geveden . “I don’t view it as a welding-quality issue, I view it as an inspection-technique issue.”

It was not clear how many bad welds there are on the 12 tubes. Neither BWXT nor the Navy had a timetable for fixing them, at deadline Tuesday for Defense Daily. Couch wrote that the welding problem stemmed from “non-destructive testing affecting BWXT missile tubes and payload tubes.” Couch added that two other missile-tube vendors — which he did not identify — have not had the same welding problem.

BWXT Nuclear Operations built the 12 troubled tubes under a Block II Common Missile Compartment tube assembly subcontract awarded by GDEB in April 2017, and worth a little more than $75 million. BWXT is under contract for 26 tubes, Couch said. The company expected to finish building the tubes in 2021, according to a press release announcing the Block II subcontract award.

In an emailed statement, GDBE said it "is investigating a weld issue identified by one of its subcontractors on missile tubes delivered to GDEB for use in the U.S. COLUMBIA and UK DREADNOUGHT SSBN programs and payload tubes for the VIRGINIA Class SSN program.  GDEB is working closely with the subcontractor and the Navy to mitigate any potential impacts to these programs.  As our customers expect the best from us, safety and quality are central to the culture at General Dynamics Electric Boat."

Defense News was first to report the bad welds on the 12 BWXT missile tubes, publishing a story Monday evening hours after BWXT filed its latest 10-Q form with the Securities and Exchange Commission. General Dynamics did not mention the missile tubes in its 10-Q for the quarter ended June 28.

In Common Missile Compartment tubes measuring 45 feet tall and 87 inches in diameter, Columbia-class subs could carry both high- and low-yield, nuclear-tipped, Trident II D5 missiles made by Lockheed Martin [LMT]. Each Columbia-class sub would have 16 tubes, down from 20 on each current-generation Ohio-class ballistic-missile sub. The Navy plans to replace today’s fleet of 14 Ohio-class subs with 12 Columbia-class subs.

The Department of Energy, which owns and maintains U.S. nuclear explosives, plans to start work after Sept. 30 on a low-yield version of the Trident II D5’s W76 warhead. The low-yield weapon will be a modified version of existing, high-yield W76 warheads, which are being refurbished for decades of duty beyond their initial design lives under a Department of Energy effort slated to wrap up by Sept. 30, 2020.

GDEB’s cost-plus, integrated product and process development design completion contract for the Columbia-class sub was awarded by Naval Sea Systems Command in September and is worth about $5 billion, with options. Last year, the Navy told the Congressional Research Service the 12-ship Columbia-class program could cost a total of about $120 billion, in 2010 dollars.

The Common Missile Compartment tubes program, part of GDEB’s Columbia-class prime contract, is jointly funded by the U.S. and the U.K. The U.K. plans to use the missile tubes in its future Dreadnaught-class, nuclear-armed, ballistic-missile submarines. The British subs are scheduled to go into service late next decade.

“Impacts to the delivery of missile tubes to the U.K. will be assessed upon completion of GDEB's efforts to define and scope next steps,” Couch wrote in his email.





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